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Dynex Updates Capital Expansion Progress

14.09.10

Lincoln, England, September 14, 2010 – Dynex Power Inc., a leading specialist high power semiconductor company, today provided a status report on the capital expenditure program to upgrade and expand its fabrication facility for silicon chips to be used in insulated gate bipolar transistor (IGBT) modules. The program was fully funded by a rights issue completed in December 2009.

The existing line, which processes 4-inch diameter silicon, is being replaced by two 6-inch lines. The installation of the two new lines will increase capacity approximately tenfold. The largest portion of the project output is expected to be sold to Dynex’s majority shareholder, Zhuzhou CSR Times Electric Co., Ltd. to take advantage of the significant opportunities in China.

The first of the two new 6-inch lines has been completed. The construction of the second line is expected to be completed this year. Production is currently being ramped up on the first line, whilst production from the second line is expected to come on stream in 2011. Management is pleased to confirm that the program completion remains on schedule, in line with its expected timeline and on budget.

The construction involved in the capital expansion has caused significant disruption to Dynex’s production and financial performance. However, the negative effects were expected. Dynex also previously announced its expectation for weaker revenues in Q3 and Q4, which expectations remain in-place based on an anticipated combination of disruption and weakening order book. Nevertheless, the Company continues to expect that its 2010 financial performance will remain on plan. If the recovery of the high power semiconductor market continues to be slow, as Dynex expects, the Company’s weaker order book will negatively impact its Q1 and Q2 performance in 2011. That potential weakness will likely occur before the production from the two new lines is fully ramped up and Dynex enjoys the full benefits of the opportunities in China.

While weakness continues in global high power semiconductor markets, Dynex’s near, medium and long term opportunities remain exciting. China’s economic stimulus program includes a very substantial expenditure on railway infrastructure and CSR Times Electric is part of a robust Chinese enterprise that supplies nearly half of the railway trains in China. Their demand for IGBT products is expected to exceed Dynex’s production capability even after the capital expenditure project is complete.

Dr. Paul Taylor, President & Chief Executive Officer, explained that the Company’s management continues to regard the capital expenditure program to be transformational to Dynex. Dr. Taylor said, “This program is the most exciting thing Dynex has ever undertaken. We are pleased with the progress and expect the construction work to be complete by the end of this calendar year, as planned. We are also gratified that field testing of Dynex IGBTs on China railways is continuing smoothly under the supervision of CSR Times Electric and we remain confident that our product will achieve full acceptance in China, in line with our expectations”.

“We are keenly aware of the rapid pace of Chinese rail expansion,” added Dr. Taylor. “If the current pace continues, we expect to sustain significant growth in our IGBT revenue over the medium term, at least. The formation of the Research and Development Centre, described in our releases of May 13, 2010 and September 9, 2010, positions Dynex very well for longer term performance. Completing our expansion program as well as boosting our R&D activities, along with receipt by Dynex Semiconductor Limited of the prestigious Queen’s Award for Enterprise announced in April, make 2010 the most gratifying year in the Group’s history and lays the foundation for continued improvement of the business in future”.

Bob Lockwood, Finance Director and Chief Financial Officer, added, “The extensive construction has impaired both our revenue growth and our margins in 2010. However, the combined impact is in line with our expectations. At the same time, we continue to anticipate that improved economics will be evident starting in Q2 of 2011. We couldn’t be more pleased with our expansion project. The only concern is that the effects of a weakening order book might be realized before the uplift from our revenue opportunities in China”.

Conference Call
A conference call for analysts and interested listeners will be held 16 September 2010 at 11:00 a.m. (EST). The call-in numbers for participants are (1-888) 231-8191 and (1-647) 427-7450.

A replay of the call will be available on 16, September 2010 until 23, September , 2010. To access the replay, call (1-416) 849-0833 or (1-800) 642-1687 enter pass code number 99969758, and then press the pound (#) key.